The Changing Business Environment
Businesses are continually facing change, whether these changes are big or small, it is important for firms to be aware of trends ahead of time.
Most notably change is occurring from increased competition, rapidly changing consumer preferences and a volatile economic environment. However, the way in which companies’ deal with these continuous disruptions, and whether they can successfully turn change into opportunity, will ultimately define their competitive advantage.
79% of businesses agree that it is important to respond quickly to change, but why is it that failure to adapt is most common amongst some of the bigger and more successful companies?
Key Reasons for Failure
- Unwillingness to change
Many of the best insights into change in a business can come from the people on the front line, those who have direct contact with the customer base. However, it is often that management’s unwillingness to change from existing strategies hamper business opportunities for change and growth. Failure is therefore more commonly found to be within more successful companies due to the risk adverse nature of their decision making. As success can often breed overconfidence, managers will frequently miss clear market signals around them, resulting in complacency. This is commonly known as ‘threat rigidity’, when firms behave inflexibly when faced with problematic situations.
A firm’s routine and dominant responses will often form into habits and become ingrained as a part of the firm’s culture, therefore making it difficult to adapt to new approaches when faced with change. It is therefore important to breed a culture that encourages trial and error, something that Google and Amazon are exceptionally good at inspiring in their workplace. Businesses should not be put off by failure, but instead, leadership must encourage mistakes and embrace this mentality. Encouraging employees to continuously try out new ideas and figure out the best one, will ultimately drive far more innovation.
- Innovative Capability
A lack of innovative capability within the business can be another more common reason for businesses failing to adapt. Many companies are aware of the transformations going on around them, however struggle to convert this awareness into actionable strategies, lacking the capacity to make decisive and committed change.
In order to succeed, transformation should not be viewed as a singular event. Instead, growth through innovation must be ingrained into the organisations way of thinking. Promoting creativity and the sharing of new ideas should be encouraged in all organisations, as this allows for businesses to stay ahead of disruptions, continually transforming and forecasting changes before they occur.
Finally, it is important to have diversity in the workplace in order to minimise these inevitable blind spots. The solution in this is to hire people with different frames of reference, creating a diverse workforce and fostering an environment where all ideas are welcome, so that employees feel comfortable sharing ideas and opinions. A recent study has supported this, where 3,000 of the largest publicly traded companies were ranked based on the level of employee diversity, it was found that those with the most diverse workforce were better at producing innovative products and services.
There are certainly things that can be done by larger corporations to address these change management issues, but they require strong leadership, real vision, and bold execution. Firstly, to successfully adapt, organisations should look towards the way in which they hire and organise their teams, and ask whether they are fostering an environment that encourages exploration and rewards success. Secondly, it is essential for businesses to promote goal-orientated innovation, weaving this into every aspect of the company. Finally, successful change requires a clarity of vision. Therefore, it is imperative that a common belief is established that aligns with the company mission and what you are delivering to your customers so that meaningful change can occur at every level of the business.
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